Wednesday, March 16, 2016

Almost 16 years ago to the day, on March 6, 2000, Legal Times published my commentary, “Any
Volunteers?” The essay bemoaned the Federal Communications Commission’s
then-increasingly common practice of accepting supposedly “volunteered”
conditions by merger applicants, almost always late in the day, in order to get
the Commission – finally – to approve a long-pending proposed merger.

I referred to this phenomenon of supposedly “volunteered”
action as “regulation by condition.” And I explained how the indeterminate “public
interest” standard makes it easier for the Commission to spur such volunteerism
in the context of reviewing transactions that need agency approval. I offered reforms
of the merger review process, so merger applicants would not need “to continue
playing the FCC’s version of ‘Let’s make a deal.’”

Well, in the 16 years since, I have written several dozen other
pieces, and testified before Congress at least twice, urging reform of the
merger review process, either by Congress or the FCC itself. Rather than go
back and count them all, I’ll just call this one, “Any Volunteers? – Part XX.”

Without rehashing the more complete discussions contained in
many of those pieces, I just want to make one particular point about the current
review process involving the proposed Charter – Time Warner Cable – Bright
House Networks merger. As my colleague FSF Senior Fellow Seth Cooper explained
in a blog
last week, several parties, which, not surprisingly include competitors, are
urging the FCC to impose various conditions on the proposed merger if the
agency approves it at all. These conditions relate to claims that a merged
Charter/TWC/BHN would adversely affect the availability of online video
distributor (OVD) services and that the merged company would stop making its
video services accessible to independently manufactured and supplied set-top
box navigation devices.

In his blog, Seth explains why, in light of marketplace
developments, the proposed Charter/TWC/BHN merger poses only a remote potential
for the claimed harms to occur. And we explained why this is so at much greater
length in the comments
we filed with the Commission in connection with its review.

The point I wish to make here is the same one I made 16
years ago: When the Commission indulges in “regulation by condition,”
inevitably, its action is “characterized by a whiff of regulatory extortion”
that necessarily implicates accepted rule of law norms.

It need not be this way if the FCC would exercise a modicum
of regulatory self-restraint. And if it would simply adhere to its own
injunctions. For example, the Commission often says, as it did in the order
approving the AT&T/DIRECTV merger, words to this effect: “To the extent that there potentially is an
industry-wide public interest harm…., it would be beyond the scope of this
proceeding in any event as it is not transaction specific.” Or: The
Commission “does not impose conditions to
remedy pre-existing disputes between parties that are unrelated to the
transaction at issue….” Or: The Commission “will not impose conditions to remedy pre-existing harms or harms
unrelated to the transactions.”

For better or worse – quite arguably worse, from the
perspective of whether any new regulatory action is needed – the Commission
already has initiated generic industry-wide proceedings concerning the online
video distributor and video device issues raised in connection with the
proposed merger. Despite any suggestions to the contrary by the
condition-seekers, there is no good reason, given the existence of the generic
proceedings, to single out Charter-TWC-BHN for special or unique treatment.

There is a time and place for volunteerism outside the realm
of official government proceedings. Over the last 16 years, at various times
the Commission has been more or less inclined to extract so-called “voluntary” conditions
in merger proceedings. On those occasions when it has exercised a proper degree
of regulatory restraint, I’ve gladly commended the agency.

The Commission should use the Charter merger to move away
from “regulation by condition.”